It might well be.
Their appetite for seeking out new ways to line their pockets is being driven by the potential that the UK government and EU community could put a squeeze on the levels of card payment fees that they can charge retailers.
This would affect the ‘interchange’ part of the fees and so the banks have sought to offset any potential EU legislation by devising ways to crank up their revenues in new ingenious ways – all at the expense of retailers
One way they have found is to change the classifications on many cards whereby the banks and card schemes can claim they are a premium variant and not a plain vanilla product even though they are technically no different and offer just the same functionality.
Another wheeze is the explosion in cash-replacement payment cards they are bringing to market. The vast majority are pre-paid cards, with most of them being classified as credit cards, and so have much higher fees attached to them than non-credit cards.
They have double the interchange fee of debit cards for instance. The problem for retailers is that they cannot distinguish this new breed from any other card type. They only find out the onerous fees attached to them when they get their statement from the bank.
MasterCard and Visa have also introduced a ‘card scheme fee’, which they argue has always been charged but they are now splitting it out from the interchange. By doing so they claim that any EU reductions on card fees will not be applicable to this part of the fee.
Anybody got a clue as to the charges on these cards?
The splitting out of this new fee makes it tougher for the EU regulators to get a handle on what exactly is being charged to retailers and therefore where any future restrictions can be applied. This move has also made this new fee visible to retailers for the first time. Although it is charged at only a modest level at present the worry among some of the UK’s largest merchants is that it will only go one way - up.
These various fee hikes go completely against the ongoing lowering of the price of technology and the cost to the banks of processing electronic transactions. Remember Moore’s Law – which states a doubling in IT performance is achieved every two years – well the banks have hijacked this and seem to have their own More-for-Us Law.
Despite the various manoeuvres by the banks and card schemes the OFT simply states that it has to wait for the EU before it can take any action to address the issue. Why is this when it has nothing to do with the EU? The OFT could and should stop it right away.
It’s all rather perverse because on the one hand the government is saying the banks should be constrained, but with card fees they are letting them profit heavily at the expense of retailers, which you could argue is a tax on consumers. There is clearly no willingness to tax the banks despite the rhetoric we hear from politicians.
The problem for the retail industry is how to shame the government into doing something about this rip-off that is being perpetrated by the banking industry and the card schemes.